Method and system for comparison and evaluation of investment portfolios

ABSTRACT

A method and system performs an analysis to compare and evaluate the performance of an investment portfolio. The method and system includes fiscal data realignment and multiple holdings date evaluations for fundamental financial analyses for each stock in the investment portfolio. The fundamental financial analysis can include a negative base number inclusion process and uses financial data for the stocks selected from comparable weighted time periods, each weighted time period including holdings of the investment portfolio as of each time period, thereby generating a more accurate evaluation of the investment portfolio.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation-in-part of copending application Ser.No. 09/900,724, filed on Jul. 6, 2001 and which is hereby incorporatedby reference in its entirety.

FIELD OF THE INVENTION

The present invention relates to a method and system for comparing andevaluating investment portfolios. More particularly, the presentinvention relates to a method and system for evaluating the performanceof investment portfolios, such as pension funds, profit sharing funds ormutual funds, of securities such as common stocks or corporate bonds,based on fundamental performance measures commonly applied to individualsecurities, such as using data from financial statements such as 10-Ksand 10-Qs.

BACKGROUND INFORMATION

Fundamental analysis of a company's financial statements is amethodology used to analyze the performance of securities, especiallystock. Financial data made available in company disclosures generallyserve as the basis for the fundamental analysis. For example, thesefinancial data can be extracted from financial statements such as 10-Ksand 10-Qs. These statements are reported based on fiscal years andfiscal quarters. The financial data can be entered into various formulaein order to gauge the performance of a company's underlying business.Fundamental analysis uses data from these financial statements tomeasure growth, profitability, capital structure and valuation. Examplesof fundamental measures are: earnings/sales growth rates; return onequity; debt:equity ratios; PE ratios.

Stock databases containing the financial data are commerciallyavailable. The financial data associated with a specific company areusually referenced by a CUSIP number. CUSIP numbers, operated byStandard & Poor's for the American Bankers Association, establish astandardized system for identifying financial instruments, for example,the stock of all registered U.S. and Canadian companies and U.S.government and municipal bonds.

Not until recently were databases that identify all of the stocks of amutual fund by CUSIP number made commercially available. The CUSIPnumber allows the financial data in a stock database to be associatedwith the respective stock in a mutual fund in a fund database.

As with individual securities, analytic methods can be used to measurethe overall performance of a mutual fund or other financial portfolio.Traditional analyses of mutual funds which measure performance are basedupon price changes and volatility. For example, with respect to theanalyses of mutual funds, references to total return represent a fund'sgains over a specified period of time. Total return includes both income(in the form of dividends or interest payments) and capital gains orlosses (the increase or decrease in the value of a security). Commercialproviders of investment information, for example Morningstar, Inc. ofChicago, Ill., calculate total return by taking the change in a fund'snet asset value, assuming the reinvestment of all income andcapital-gains distributions (on the actual reinvestment date used by thefund) during the period, and then dividing by the initial net assetvalue.

Unless marked as load-adjusted total returns, conventional commercialanalyses of mutual funds do not adjust total return for sales charges orfor redemption fees. (e.g., Morningstar Return, MorningstarRisk-Adjusted Ratings, and the load-adjusted returns do incorporatethose fees.) Total returns do account for management, administrative,and 12b-1 fees and other costs automatically deducted from fund assets.

These conventional mutual fund analyses do not, however, use methodsthat resemble the fundamental analysis techniques used in fundamentalequity analysis. For example, there are analyses of mutual funds whichmeasure performance based on price changes and volatility measures.There also are analyses which list the top ten (or some other smallnumber) stocks (as measured by market value). Yet other mutual fundanalyses measure industry or sector overlap among funds (e.g., thepercent in technology in find A versus the percent in technology in fundB). There also are systems which compare the securities in investmentportfolios to determine overlap. However, these performance measurementsof mutual funds do not accurately reflect the overall or cumulativefundamental analyses of the individual stocks of the portfolio.

Thus, there is a need for a system and method that evaluates theperformance of a mutual fund, or other investment portfolio, that usescomparable and complete fundamental data based on the individual stockswithin the portfolio. In addition, there is a need for a system andmethod that evaluates the performance of an investment portfolio usingthe actual holding of the portfolio, such as are reported on eachholdings date of the portfolio.

Buyside Research of Darien, Connecticut has developed a computer program(referred to herein as the “Stock System”) including text and screendisplays which graphically compare the performance of one company withits six closest competitors using fundamental financial data. In June of1999, these graphic comparisons became commercially available over theMultex system, now owned and operated for Reuters, which distributed“Wall Street” research to more than two million users. The presentinvention combines unique processes of this Stock System with otherunique processes in order to aggregate the stock measures for mutualfunds or investment portfolios.

Because financial measures and aggregate financial measures of companiesare being compared, special processes must be employed to insure thatthese comparisons are made over similar time periods and are asinclusive as possible. The present invention features unique processesto improve comparability and inclusiveness.

SUMMARY OF THE INVENTION

According to an exemplary embodiment of the present invention, a methodand system are provided wherein a fundamental analysis is performed onthe stocks in a financial portfolio, such as a mutual fund or pensionfund, to measure the performance of the portfolio. First, the data usedto perform the analysis are extracted from a securities (e.g., stock)database that contains information from, for example, companydisclosures. A first comparison process filters out any financial datafrom companies that are not approximately one year in length. Thus, thepresent invention avoids comparing companies in a portfolio that lackdata for the full fiscal period desired for evaluation. For example, acompany which begins reporting in September 2003 will not have 12 monthsof earnings as of December 2003; thus its data for 2003 annualcomparisons would be excluded. A second comparison process is thenexecuted to convert the data for any fiscal quarter/year period into acomparable calendar quarter/year period. Once these two processes(collectively, “fiscal realignment”) are completed, “fundamentalmeasures” for each company are calculated based on formulae commonlyused throughout the investment community.

Fundamental analysis uses data from these financial statements tomeasure growth, profitability, capital structure and valuation for theholdings in a portfolio. Examples of fundamental measures are:earnings/sales growth rates; return on equity; debt:equity ratios; andPE ratios and other measures. The fundamental measures used in thepresent invention use rates and ratios derived from two values (“basevalues”): a beginning value and an ending value (in the case of compoundannual growth rates); or a numerator and denominator (in the case ofquarter-to-quarter earnings percent changes). Since there is apossibility that one of these base values can be negative, the presentinvention uniquely uses these two base values, rather than a derivedrate or ratio, to attain “negative base number inclusions.”

Each week, new data are provided for the securities database and thefunds database to update underlying financial data and fund holdings.Fund data are lists of the most recent information about mutual fundsand their stocks; there are, for example, approximately four thousandequity mutual funds for which information is available. The holdings ofa mutual fund can be associated with the underlying financial data foreach holding using, for example, the CUSIP number, now available instock and fund databases. The CUSIP number used in both databasesprovides the link between the databases.

Weights for each stock in each portfolio can be calculated based on themarket value of that stock divided by the total market value of thestocks in each portfolio (e.g., the market value of any one stock isdivided by the market value of all stocks). Since there is a possibilitythat one of the base numbers can be negative, the weights are multipliedby the base numbers (e.g., from the stock database) of each stock thathave been subject to fiscal realignment. Summing the products of thesemultiplications allows for negative base number inclusion and aggregatedvalues for the fundamental measures. For example, when a fund's holdingsare measured for two or more holdings dates, the portfolio's basenumbers for each holdings date are used in a rate/ratio calculation.That rate/ratio calculation is weighted by the time period related tothe holdings date and averaged; if an aggregate base number for aportfolio on a holdings date is negative, results for all holdingsperiods for that portfolio are excluded. Any fundamental measure listedin Table 1 below, or any other variable similar to that found in on aCompustat-like database can be aggregated. For example, an aggregate EPSgrowth rate can be produced for an investment portfolio.

As explained in the co-pending application, fundamental analysiscomparing stocks is based on specific time periods; for example,earnings growth for chemical companies may be compared for 2004.Comparisons would be inaccurate if the 2003 earnings of some companieswere compared to 2004 earnings of other companies. So too, portfolioaggregates (based on the stocks in a portfolio) must be based oncomparable time periods. By applying fiscal realignment, the presentinvention provides at least partial time period comparability (e.g., atleast two out of three months in a quarter or six out of twelve monthsin a year).

Accordingly, the first comparison process applies strict time periodinclusions. For example, if a portfolio comparison specifies an earningscomparison of portfolios for 2004 and if a company has not yet reportedDecember 2004 earnings, the time comparison process according toexemplary embodiments of the present invention identifies companies thatlack data for the desired time period and excludes such companies fromthe analysis. This is in contrast to, for example, thetrailing-twelve-month convention employed throughout the industry. Thus,the prior art trailing-twelve-month methodology would substitute12-month earnings through Sep. 30, 2004 or, if those data were not yetreported, 12-month earnings through Jun. 30, 2004. The presentinvention, in contrast to the trailing-twelve-month convention, providesthe same time period comparability for stock portfolios that isnecessary for comparisons of stocks.

With these aggregate fundamental measures, portfolio performance can bemeasured using the same fundamental benchmarks which are widely employedfor common stock analyses.

Measures deemed essential for fundamental analysis of one stock arepresumed to be at least as valid for a group of stocks. By employingfiscal realignment, including strict time period inclusion provided bythe first comparison process, the system and method according to anembodiment of the present invention provide results which are morecomparable than any other portfolio aggregates which exist today. Byemploying the unique negative base number inclusions process, theresults are far more inclusive than any other existing evaluationapproaches.

The present invention uniquely provides two approaches to fund analysis:(1) with a primary focus on a specific corporate fiscal reporting periodcomparisons (e.g. 2003 EPS vs. 2002 EPS) as described in the co-pendingapplication; and (2)with multi-holding dates comparisons (e.g., fundholdings from a desired evaluation period—mm/dd/yyyy throughmm/dd/yyyy—are compared using data for the holdings of the fund as ofeach holdings reporting date and weighted appropriately).

Multi-period comparisons are, for example, comparisons that include morethan one holdings date (holdings dates are those dates on which aportfolio's investment are reported). For example, to compare theone-year sales growth of stocks in a group of portfolios based on theirholdings from Dec. 31, 2001 through Dec. 31, 2003, each portfolio mayhave reported its holdings more than once during a year. (Indeed, theSEC recently changed the required reporting frequency of mutual fundsfrom a minimum of twice a year to a minimum of 4 times a year.)

The present invention creates a weighting factor for calculations ofportfolio aggregates which include multiple holding reporting periods.As an example, one-year sales growth rate may be of interest over a twoyear period for two portfolios. Portfolio #1 may have reported holdingson Jun. 30, 2002, Dec. 31, 2002, Mar. 31, 2003, Jun. 30, 2003, Sep. 30,2003 and Dec. 31, 2003. Portfolio #2 may have reported semiannually forboth years.

Using the above example, the system and method according to an exemplaryembodiment of the present invention determines the total number ofmonths involved with the evaluation period (which can be a predeterminedevaluation period selected by a user). In this example, a 24-monthevaluation period was selected. An aggregate 1-year sales growth ratethen is calculated for the stocks in each portfolio as of eachportfolio's holdings report dates. The aggregate growth rate is weightedby the number of months attributable to each reporting date. Thus, todetermine the average 1-year sales growth rate of Portfolio #1'sholdings on six report dates over a 2-year period, the calculation wouldbe:

Total months=ending date (requested by the investor)—starting date(requested by the investor).

Aggregate 1-year sales growth rate on Jun. 30, 2002 X 1^(st) reportdate's weighting factor

Plus

Aggregate 1-year sales growth rate on Dec. 31, 2002 X 2^(nd) reportdate's weighting factor

Plus

Aggregate 1-year sales growth rate on Mar. 31, 2003 X 3^(rd) reportdate's weighting factor etc.

In this case, the respective weighting factors would be: 6 mos./24 mos.(for the 1^(st) report date), 6 mos./24 mos. (for the 2^(nd) reportdate) and 3 mos./24 mos. (for each of the 4 reporting dates in 2003). Anunweighted average of 6 reporting dates would arithmetically emphasizethe four 2003 rates vs. the two 2002 rates. By weighting with eachreport date's coverage period, the two years are given appropriateproportions in the multi-report date time frame. The weighting factorsfor each of Portfolio #2's four 1-year sales aggregates would be 6mos./24 mos. (or ¼).

Additional objects and advantages of the present invention will be setforth in the description which follows. The objects and advantages ofthe present invention may be realized and obtained by means of theinstrumentalities and combinations particularly pointed out in theappended claims.

BRIEF DESCRIPTION OF THE DRAWINGS

The accompanying drawings, which are incorporated in and constitute apart of the specification, illustrate an exemplary embodiment of thepresent invention.

FIG. 1 illustrates an exemplary series of operations performed bycomputer software for evaluating an investment portfolio according to anexemplary embodiment of the present invention;

FIG. 2 illustrates an exemplary analysis of an investment portfolioaccording to an embodiment of the present invention; and

FIG. 3 illustrates a system for evaluating an investment portfolioaccording to an exemplary embodiment of the present invention.

FIGS. 4 a-4 c illustrate an exemplary ranking and grouping of equityfunds according to an exemplary embodiment of the present invention.

DETAILED DESCRIPTION

FIG. 1 illustrates an exemplary method for transforming data from stockportfolios or mutual funds into a format suitable for fundamentalanalyses according to an exemplary embodiment of the present invention.

For example, the process starts when the Stock System creates asecurities database for the Fund System. For the purposes of discussionherein, processing of the underlying financial data for a company isreferred to as being performed by a “Stock System” and the use of theprocessed data to evaluate a portfolio (e.g., a collection of stocks) isreferred to as being performed by a “Fund System.” It should beunderstood that the Stock System and the Fund System can be implementedas separate systems (e.g., separate computer systems) or can be separateprocesses carried out by a particular computer system.

The Stock System accesses a suitable commercially available databasecontaining the desired underlying financial data. For example, at 1010the process begins with accessing a commercially available database ofinformation from 10-Ks and 10-Qs. Examples of these databases areStandard and Poor's Compustat and Market Guide's Investment Manager. At1020, the desired financial information can be extracted from companydisclosures such as balance sheets, income statements, and cash flowstatements contained in the database. Specific data taken from a balancesheet (and stored in the financial data database) can include, but arenot limited to, liquid assets, investments, inventories, fixed assets,intangible assets, short-term liabilities, long-term debt, and leases.Specific data taken from an income statement can include, but are notlimited to, sales, expenses, and net income. Specific data taken from acash flow statement can include, but are not limited to, cash receiptsand cash payments.

At 1020, the relevant data for each company are extracted from thedatabase. In an exemplary embodiment, the data for all companies in thedatabase are used while in alternative embodiments, the data for onlyparticular companies of interest can be used. For example, weekly batchprocessing of financial data for numerous companies can be performed orreal-time processing of financial data for particular companies can beperformed based on the needs or desires of the user.

The extracted financial data form base numbers used to derivefundamental investment measures; for example, the extracted data couldinclude earnings per share (“EPS”) for every quarter/year and assets forevery quarter-end/year-end. The data for each company are identifiedwithin the database using a unique CUSIP number as is known in the art.The database at 1010 contains, for example, historical quarterly/annualdata dating back ten years or more. As is known in the art, thesecommercially available financial databases are updated daily or weeklyand include the financial histories for more than ten thousandcompanies.

At 1030, the first part of the fiscal realignment process according toan embodiment of the present invention is initiated on the data setaccessed or extracted from the financial database. The purpose of thisfirst comparison process is, for example, to eliminate companies that donot have comparable lengths of time in their fiscal years. For example,a company may not have enough historical financial information for aparticular time period, such as five years or one year, because ofmergers or divestitures, or the company may not have been in existencefor the desired time period.

Maximum and minimum limits should be established for the fiscal years toprovide a meaningful financial analysis. If, for example, a company witha December fiscal year-end begins business in June, its first year ofbusiness will be a six month period—not a twelve month period. Tocompare that company's sales with another company which was in businessfor the entire twelve month period of that year would be inappropriate.Because companies are compared over a number of different time periods,such as five years, yearly or quarterly, the analysis should proceedwith the time periods being similar. The maximum limit for a fiscal yearhas been set at, for example, thirteen months or fifty-four weeks, andthe minimum limit for a fiscal year has been set at, for example, elevenmonths or fifty weeks. Hence, for fundamental measures over a five yearperiod, data for companies which exceed the maximum or minimum areexcluded from the securities database. Small adjustments can be made tothese maximum and minimum limits as desired.

At 1040, the second part of the fiscal realignment process is initiated.The second comparability process serves to, for example, convert allfiscal years and quarters into comparable calendar years and quarters toimprove the accuracy of the analysis. The analysis may make comparisonsfor, for example, a five year, annual, year-to-date or quarterly period.

Two steps are used to complete the second part of the fiscal realignmentprocess: (1) derive a calendar-based date of the fiscal year/quarter and(2) realign the fiscal period into comparable calendar periods.

Step 1: Deriving a calendar-based date of the fiscal year/quarter

If the last day of the fiscal period for a company ends between thefirst and fifteenth of a month, then the fiscal month is changed theprevious month. For example, if the last day of the fiscal period isApril 10th, then the fiscal month is changed to March. If the last dayof the fiscal period is April 16th, however, then the fiscal monthremains the same. If, as part of this calculation, the fiscal month isJanuary, then the fiscal month and year are changed to the last month ofthe previous year. Thus, for instance, if the date is Jan. 13, 2001,then the fiscal month and year are changed to December 2000.

Step 2: Realigning the fiscal period into comparable calendar periodsusing the dates derived in Step 1:

For calculations of values covering a five year period, if the year-endfiscal month for a company ends between July and December, the derivedcalendar year for that company is equivalent to the fiscal year,otherwise the calendar year is considered to be one year less than thefiscal year.

For calculation of values for quarter, annual, and year to date period,if the month for any fiscal quarter end is January, April, July orOctober, then the fiscal quarter is changed to the previous calendarquarter. If the month for any fiscal quarter end is other than one ofthese months, then the month remains the same subject to Step 1described above. For example, a fiscal quarter ending on February 2^(nd)becomes the derived fourth calendar quarter of the prior year (afterboth Steps 1 and 2 have been executed). In effect, for any given derivedcalendar quarter, all realigned companies should have at least twofiscal months coinciding with the three months of the derived calendarquarter.

At 1050, the calculations of the fundamental measures based on dataaccessed or extracted at 1020 are made. These fundamental measures,subject to changes or additions, are listed in Table 1. TABLE 1 GrowthSales Growth Rate Earnings per Share (EPS) Growth Rate Common Equity perShare Growth Rate Profitability Return on Equity Profit Margins CapitalStructure Equity: Assets Interest Coverage Cash Flow: Debt ServiceValuation Price: Earnings Price: Book

Thus, once the financial data for particular companies have been throughthe realignment process as described above, the desired fundamentalmeasures can be calculated using the aligned data. The financiallyrealigned data can be stored and are referred to herein as the“Securities Database.” At 1060, the Securities Database containing thevalues calculated at 1050 are ready to be applied as an input for theFund System.

For the Fund System, for example as carried out by a conventionalcomputer system, the process begins with a commercially availabledatabase at 1070 containing information about the stocks in mutualfunds. Examples of these databases are Financial Data Concept's fundstocks and AMG Data Service's fund stocks. The financial data accessedor extracted at 1080 can include a number of data for the portfolio andfor the stocks therein. Data for the portfolio could include, forexample, the investment objective, the fund type (bond, money market,etc.), net asset values, and the holdings of the fund, etc. For eachstock (e.g., holding) in the fund, the data also includes the CUSIP ofthe stock, the number of shares, price, the market value, etc. Inaccordance with exemplary embodiments of the present invention, thefinancial data also can include the financial data for the companies ina particular portfolio as of each of the respective holdings reportingdates for the portfolio that are within an evaluation period (e.g., alist of the companies in the portfolio on each holdings date).

At 1090, weights are determined for all fund stocks with valid basevalues (e.g., companies that were not excluded by the fiscal realignmentprocess and which have reported both base values at the time of thecomputer run). Thus, for example, when calculating thequarter-to-quarter growth rate for EPS, if there are no numerical valuesfor both quarters, no weight will be calculated, and the stock will notbe included in the portfolio aggregate. With this step, the presentinvention applies strict time period inclusion to ensure that evaluatedcompanies have valid data for the time period at issue. The weight ofeach stock is determined by, for example, dividing the value of thestock (with two valid base values) by the sum of the value of allsimilar stocks (with two valid base values). For example, in a mutualfund, the value of the stock within the mutual fund is the quantity ofshares multiplied by the share price. This value is divided by the totalmarket value of all stocks in the mutual fund to obtain each security'sweight. The sum of the weights always equals one.

Further, in accordance with an exemplary embodiment of the presentinvention, the financial measure desired for evaluation, for example thequarter-to-quarter growth rate for EPS in the above example, iscalculated based on the holdings of the portfolio as of each holdingsdate in the evaluation period. Thus, the quarter-to-quarter growth ratefor EPS can be calculated using the actual holdings of the portfolio asreported on each holdings date. The aggregate quarter-to-quarter growthrate for EPS is then weighted (if necessary) by the number of monthsattributable to each reporting date. Another example of this process isdescribed in the Summary section above.

At 1100, the fiscally realigned fundamental measures, e.g., the ratesand ratios, for each stock in the fund are extracted from the SecuritiesDatabase. These measures include the items noted in Table 1 as well asthe base values used to calculate the fundamental measures.

At 1110, the Fund System aggregates the fiscally realigned data for allcompanies in the portfolio, thereby uniquely including all negative basenumbers, to calculate weighted averages for the portfolio as describedfurther below.

At 1120, the aggregated data, which can include aggregated data for anumber of holdings dates, representing an evaluation of the investmentportfolio from the Fund System can be inputted (e.g., stored) into afunds database for subsequent retrieval and use.

As is known in the art, fundamental measures are valid in financialcalculations only if both of the base values of the calculatedrate/ratio are positive. For example, if the EPS declined from $0.10 to$0.09, the EPS growth rate is −10%; the base number $0.09 and the basenumber $0.10 are positive. However, if the EPS declined from $0.10 to−$0.01, the rate is undefined or not meaningful because the base number,−$0.01, is a negative value. This is consistent with the standardpractice used in financial analysis which is to exclude rates withnegative base numbers.

For many fundamental measures, for a large number of securities, say asmany as might be found in a mutual fund, there are likely to be a numberof undefined rates and ratios because of negative base values. Withoutthe negative base number inclusion process according to an embodiment ofthe present invention, these undefined rates/ratios would not beincluded in any weighted average portfolio aggregate. Excludingsecurities with such negative financial datum results in amisrepresentation of the portfolio aggregate. By excluding thesenegative variable inputs, aggregates are incorrectly skewed to positiveresults. As a result of this conventional practice, rates and ratiosdesigned to foster comparisons are actually misleading investors inthese circumstances.

According to an embodiment of the present invention, an alternativecalculation for input variables is provided which allows the inclusionof negative values for individual stocks in an investment portfolio.This alternative calculation includes all securities in a portfolio; theportfolio aggregate, therefore, is more inclusive and thus morecomparable. If these undefined rates and ratios are to be included inthe weighted average aggregate, the negative base number inclusionprocess must be applied. For example, rather than multiply each stock'sweight by the calculated rate/ratio, the weight is first multiplied bythe base values separately for all holdings in a portfolio. The weightedbase values are then summed. The formula previously applied to the basevalues is then applied to the two aggregated and weightedtotals—creating a portfolio aggregate which includes previouslyundefined rates/ratios. (This, of course, presumes that neither of thetwo weighted totals will be negative; if one of the totals is negative,then the aggregate must be recalculated excluding rates/ratios withnegative base values.)

In an evaluation period that includes multiple holdings dates, typicallyresults would be provided based on two or more holdings dates for theportfolio. In this case, the aggregated values are calculated andweighted for the respective holdings date relative to the evaluationperiod as described above. According to an exemplary embodiment of thepresent invention, if an aggregated base value for the holdings dates isnegative, all portfolio totals are excluded from the results.

FIG. 2 illustrates an example of the exemplary method applied to amutual fund portfolio in which a year to year analysis has beenperformed on the holdings of the mutual fund. This FIG. 2, forillustrative purposes only, features quarterly statements filed throughthe first quarter of 2001.

As shown in FIG. 2, the fiscal realignment process has been executed oneach stock 2020 using the procedures described above so that only thecompanies having sufficient fiscal year data are included. For example,if any fiscal year for each company of stock 2020 is less than fifty-twoweeks, no data from that company is included in the analysis because allof the fiscal cycles are between fifty to fifty-four weeks, or eleven tothirteen months, in length.

The second step of the fiscal realignment process aligns the fiscalperiods for each company of stock 2020. For example, the respectivefiscal quarter-end dates for companies are used to align quarterlyperiods so that the base values cover approximately the same three-monthperiod or at least there are two months in common for the alignedquarters.

The exemplary mutual fund includes stocks: 2020 a, 2020 b, to 2020 r.Associated with each stock 2020 are, for example, fields 2052-2061containing: value 2052; weight 2053; QTR End 2054 (the date of the mostrecent quarter); base value₁ 2055 (QTR-t for EPS for the fiscallyadjusted first quarter of 2000); base value₂ 2056 (QTR t-4 for quarterlyEPS 1 year before, for the fiscally adjusted first quarter, 2000);growth rate 2057; weight times base value₁ 2058 and weight times basevalue₂ 2059. In this case, the fiscally aligned base values are beingused to create an aggregate EPS. Any other base values, such as thoselisted in Table 1, also could be used as desired.

Note that for example, Cisco Systems, Inc. 2020 c, has a QTR End 2054 cof Jan. 27, 2001. Under the first realignment process this date isrealigned to the fourth quarter of 2000. Thus, base value₁ 2055 cbecomes not available, or n/a because only data for the fiscallyadjusted first quarter of 2001 will be compared and therefore used inthe calculation. This stock 2020 c is excluded from the aggregatebecause it does not have base values for both base value₁ 2055 c andbase value₂ 2056.

The weight 2053 for each stock 2020 is calculated by multiplying themarket price by the share quantity for all stocks with valid values forboth base value₁ 2055 and base value₂ 2056 and dividing these productsby the total market value of all stocks with base values for both basevalue₁ 2055 and base value₂ 2056. The sum of all weights times basevalue₁ 2058 becomes the aggregate numerator 2060; the sum of all weightstimes base value₂ 2059 becomes the aggregate denominator 2062. Theportfolio aggregate 2064 is the quotient. In this case the portfolioaggregate 2064 for EPS is −55.4%, that is the weighted average quarterlyearnings of all these stocks has declined 55.4% from the first quarterof 2000 to the first quarter of 2001.

Also note that for example, Veritas Software Corp. 2020 j has negativebase values for base value₁ 2055 j and base value₂ 2056 j. Nevertheless,the values are still factored into the aggregate numerator 2060 and theaggregate denominator 2062. Conventional analyses would have excludedVeritas Software Corp. 2020 j.

In accordance with an exemplary embodiment of the present invention, theanalysis of financial data set forth in FIG. 2 can be done for theholdings of the portfolio on each of the holdings dates of the portfoliowhich occur during the desired evaluation period. Thus, for example, thecompanies set forth in the FIG. 2 analysis would change for eachholdings date to reflect the companies that actually were in theportfolio on the respective holdings date. To the extent that aparticular holdings date only accounts for a portion of the desiredevaluation period, then the aggregated values calculated for theholdings date would be appropriately weighted and then summed andaveraged to account for the entire evaluation period, as noted earlier.

Still referencing FIG. 2, financial rates are typically annualexpressions; that is, they represent the rate expressed as a compoundannual rate. According to an embodiment of the present invention,quarter versus quarter, year-to-date versus year-to-date andyear-to-year rates are calculated by simple division because the timeperiod is a year; rates for periods greater than or less than a year canbe based on the equation P(1+r)^(τ)=F,

whereP=the earliest base numberr=the rate of return, compounding annuallyτ=the amount of time between the first and second base value, expressedin yearsF=the latest base number

Financial ratios, such as an equity:assets ratio, refer to a point intime and are calculated by simple division.

Another feature of the fund analyses possible with the present inventionis a measure of portfolio stability that can be generated to provide aninvestor with an indication of the continuity of investment holdings,which serve as the bases for the aggregates in the portfolio. Accordingto an embodiment of the present invention, a stability calculation ismade based on: (1) the number or value of the stocks eliminated (e.g.,sold) from the investment portfolio and (2) the number or value of newstocks purchased in the portfolio. An example of this calculationapplied to a mutual fund is shown in Table 2. TABLE 2 Mutual Fund, e.g.,Putnam New Opportunity - A (1) 189 stocks with a starting value of$33,443,626,000.00 on Dec. 31, 1999 (2) 33 positions reduced with avalue of $1,362,148,118.16 on Jun. 30, 2000 (3) 67 stocks sold out witha value of $7,060,969,940.68 on Dec. 31, 1999 (4) 100 total sold orreduced $8,423,118,058.84 (5) 89 positions increased with a value of$5,158,208,217.76 on Jun. 30, 2000 (6) 56 new names with a value of$5,953,638,666.67 on Jun. 30, 2000 (7) 145 total increased or added$11,111,846,884.43 (8) 123 name changes (sold out & new names)$13,014,608,607.35 (9) 178 stocks with an ending value of$36,131,469,000.00 on Jun. 30, 2000

Mutual funds are, for example, required by the Securities and ExchangeCommission to report their holdings every six months. The Fund System orthe database accessed by the Funds System maintains a historic record ofthe holdings of mutual funds. Using the most recent holdings records andthe previous holdings records for each fund, a stability calculation ismade as follows:

Determine the initial number of stocks and their value at a beginningdate (line 1).

Determine the number of stocks completely eliminated from the portfolioover, for example, a six month period and the value of the eliminatedstocks as of the beginning date (line 3).

Determine the number of new stocks (e.g., new names) added to theportfolio over, for example, the six month period and the value of thenew stocks as of the ending date (line 6).

Sum the number of stocks on lines 3 and 6, or sum the values on lines 3and 6; and note the total(s) on line 8 (in this example the number ofstocks completely sold from or newly added to the portfolio weretotaled).

Divide the sum on line 8 (either number of issues or value) by itscorresponding value (either number of issues or value) on line 1. Thisvalue is the stability ratio for the portfolio. A lower value representsa more stable portfolio. To the extent the evaluation period covers morethan one holdings date of the portfolio, the values identified in Table2 can be calculated for each of the holdings dates, weightedappropriately relative to the evaluation period and then aggregated.

The above described portfolio aggregates and stability ratio can be usedto compare different portfolios.

Comparisons of portfolios can be, for example, made using the followingfour-step process:

1. Group the portfolios based on similar investment objectives (e.g.,growth, income, etc.). This initial grouping will be used for allaggregates in the following three steps. However, the stability ratioapplies to all portfolios regardless of investment objective; hencesteps 2 & 3 are performed on the entire population of portfolios, andthus it is not necessary to group the portfolio based on investmentobjective.

2. Rank portfolios for each aggregated fundamental value and for thestability ratio from highest to lowest

3. Group the ranked portfolios into a frequency distribution (e.g.,quartiles, quintiles, deciles, etc.)

4. By selecting one or more aggregated fundamental value(s), to includethe stability ratio, investors may assess what funds are in whichsegments of the combined frequency distributions.

FIGS. 4 a-4 c illustrate results of ranking and grouping severalthousand equity funds based on, for example, one-year earnings and salesgrowth of their holdings during 2003 and for which period each of thefunds had at least two holdings dates. Using the exemplary principles ofthe present invention, FIG. 4 a illustrates calculation of EPS valuesfor funds that qualify for evaluation in 2003 (e.g., all funds that havereported holdings for all of 2003). This includes funds that had atleast two different holdings dates that were summed and weightedaveraged as previously described. In this case, 2,741 funds had data for2003 and were evaluated. FIG. 4 a illustrates quartile rankings afterthe funds have been ranked from the highest to lowest one-year EPSgrowth rates.

FIG. 4 b illustrates quartile rankings based on one year sales growthfor funds that qualify for evaluation in 2003 (e.g., all funds that havereported holdings for all of 2003). The fund data included funds thathad at least two different holdings dates that were summed and weightedaveraged as previously described. In this case, 3,260 funds had data for2003 and were evaluated for one year sales growth. FIG. 4 b illustratesquartile rankings of the funds from the highest to lowest one-year salesgrowth rates.

FIG. 4 c combines the analyses of FIGS. 4 a and 4 b to plot the 2003funds by quartile. Since FIG. 4 c illustrates the intersection of FIGS.4 a and 4 b, FIG. 4 c charts the 2,741 funds that had data for both EPSand sales growth. For example, in FIG. 4 c, quadrant 1 indicates fundswith high EPS growth rate and high sales growth, while quadrant 4indicates low EPS growth rate and low sales growth.

As another example of the valuable applications of the presentinvention, consider a comparison made between fourteen growth funds.Annual compound growth rates (ACGR) for sales and earnings per share arecalculated for the five years ending 2000 using the method according toan embodiment of the present invention; these compound growth rates areshown in Tables 4 and 5 respectively and arranged in quartiles. Itshould be noted that other fundamental values besides the annualcompound growth rates for sales and earnings per share can be used, suchas the values identified in Table 1 above. TABLE 4 Sales from Dec. 31,1995 to Dec. 31, 2000 ACGR % Highest Quartile  1 PUTNAM NEW OPPTY; A64.8  2 PUTNAM VISTA; A 50.6  3 MSDW AMER OPPTYS; A 31.9  4 FIDELITYBLUE CHIP GROW 24.9 Quartile # 3  5 PUTNAM INVESTORS; A 24.9  6CONTRAFUND PORTFOLIO 24.1  7 FIDELITY CONTRAFUND 23.0  8 T ROWE PRICE BLCHIP; ADV 22.9 Quartile # 2  9 VANGUARD GROWTH INDX; INS 21.9 10 LEGGMASON VALUE TR; NAV 21.6 11 FIDELITY MAGELLAN FUND 21.1 Lowest Quartile12 CREF STOCK ACCOUNT 21.0 13 AIM: VALUE; A 15.9 14 DAVIS NY VENTURE; A14.9

TABLE 5 EPS from Dec. 31, 1995 to Dec. 31, 2000 ACGR % Highest Quartile 1 PUTNAM VISTA; A 50.6  2 AIM: VALUE; A 29.8  3 DAVIS NY VENTURE; A26.1  4 LEGG MASON VALUE TR; NAV 26.0 Quartile # 3  5 FIDELITYCONTRAFUND 25.9  6 CONTRAFUND PORTFOLIO 25.8  7 T ROWE PRICE BL CHIP;ADV 19.8  8 FIDELITY MAGELLAN FUND 18.7 Quartile # 2  9 MSDW AMEROPPTYS; A 17.9 10 FIDELITY BLUE CHIP GROW 16.4 11 PUTNAM INVESTORS; A15.5 Lowest Quartile 12 VANGUARD GROWTH INDX; INS 15.4 13 CREF STOCKACCOUNT 12.3 14 PUTNAM NEW OPPTY; A −4.9

Once the ACGRs are computed, the fourteen growth funds are ranked fromhighest to lowest and then divided into a frequency distribution such asquartiles, as described in step 3.

According to an embodiment of the present invention, the portfolios(e.g., funds) can be categorized into four combinations depending onwhich quartile they belong. For example, possible combinations are: highsales and high earnings; high sales and low earnings; low sales and highearnings; and lows sales and low earnings.

Also according to an embodiment of the present invention, the stabilityratios can be calculated for each of the funds. The portfolios can thenbe ranked from highest to lowest and then divided into quartiles basedon their stability ratios. For purposes of this example, the calculationof the stability ratio is not shown for each fund but would be carriedout as described above. Combining the stability ratio and the resultsshown in Tables 4 and 5 yields Table 6, which presents a multivariateanalysis of the fourteen mutual funds. TABLE 6 Sales/EPS ACGR & Last SixMonths of Stability 5 Year STABILITY RATIO ACGR % HIGHEST LEVEL 3 LEVEL2 LEAST Growth Funds Sales EPS 19-53 58-72 73-96 98-165 TOTAL HighSales/High 30 31 — 1 1 2 4 Earnings High Sales/Low 37 11 — 2 1 1 4Earnings Low Sales/High 18 25 3 — 1 — 4 Earnings Low Sales/Low 22 14 1 1— — 2 Earnings Total Number of 14 Funds

For example, in Table 6, among the fourteen growth funds, there are fourfunds that are classified as highest in both sales and earnings growth.In this example, the top two quartiles of Tables 4 and 5 make up whatconstitutes “high” for sales and earnings respectively. Similarly, “low”sales and growth values are made up of the two lower quartiles. For afund to be categorized in the “high sales/high earnings” category, itmust be in the intersection of high sales and high earnings. Forexample, the following funds fall into the category of high earnings andhigh sales simultaneously: Putnam Vista; Contrafund Portfolio; FidelityContrafund; and T Rowe Price BI Chip.

On average, the four funds in this category have holdings with salesthat grew at an average of thirty percent per annum compound andearnings at an average of thirty-one percent per annum. The stabilityratio is divided into four quartiles, or levels, based on theirpercentage of turnover. In the example shown in Table 6, the stabilityratio levels are shown as percentage ranges. For example, if a portfoliohas a hundred holdings and during the period of evaluation twenty stockswere added and twenty stocks were sold, then the percentage equals(20+20÷100) which is 0.4 or 40%. One of the four funds is in theupper-middle quartile of stability; one is in the lower-middle quartileof stability; one is in the lowest quartile. Therefore, it can beconcluded that the fund in the second quartile of stability (Level 3)(represented by the bolded figure) has the best records for earnings andsales growth—along with some measure of stability in the holdings of thefund.

FIG. 3 illustrates a system for evaluating an investment portfolioaccording to an exemplary embodiment of the present invention asdescribed above, including comparison of investment portfolios for anevaluation period that includes multiple holdings dates that need to beweighted and aggregated in accordance with aspects of the presentinvention. The exemplary system includes, for example, a computer system3000, a fund database 3500 and a stock database 3600. The computersystem 3000, could be, for example, a microprocessor based server suchas SUN WORKSTATION or WINDOWS NT server or other computer system havingsuitable processing power and storage. Computer system 3000 includes,for example, a central processing unit 3010, random access memory 3020,input/output device(s) 3030 and display 3040 coupled via a conventionalbus 3050. Also coupled to bus 3050 is a storage device 3060 such as ahard disk drive.

Memory 3020 could include, for example, various modules necessary tocarry out the method according to an exemplary embodiment of the presentinvention as described above. Examples of modules stored in memory 3020are executable software code to implement the functions of a Fund System3022 and a Stock System 3026. Alternatively, the Fund System 3022 andStock System 3026 can be implemented in separate computer systems thatare suitably connected. The output of Fund System 3022 (e.g., theaggregated portfolio measurement value using fiscally realigned data andnegative base number inclusions) can be stored, for example, in anoutput database 3024. The output of Stock System 3026 is, for example,data that have been processed through the fiscal realignment process andcan be stored in aligned stock database 3028 for use by the Fund System3022.

Fund database 3500 can be, for example, any database that contains fundinformation, e.g., the holdings of a mutual fund or investment portfolioand the CUSIP numbers for the holdings and is accessed by the FundSystem 3022 through a suitable communications link. Likewise, stockdatabase 3600 can be any database that provides the underlying financialdata for publicly or privately held companies and is accessed by theStock System 3026 through a suitable communications link. Both the funddatabase 3500 and the stock database 3600 can be implemented bycommercial content providers of these data as is known in the art.

A user 3800 can, for example, access the computer system 3000 through adedicated communications link such as T1 or T3 or via a public networksuch as the Internet. If, for example, the user 3800 would like tocompare certain investment portfolios, the user would submit the requestto the computer system 3000 by providing the portfolios to be comparedand the type of fundamental financial data to be used for thecomparison. The computer system 3020 can provide the requestedinformation in real time or have the requested information processedahead of time and retrieved from a storage device.

Additional advantages and modifications will readily occur to thoseskilled in the art. Therefore, the present invention in its broaderaspects is not limited to the specific details and representativedevices shown and described herein. Accordingly, various modificationsmay be made without departing from the spirit or scope of the generalinventive concept as defined by the appended claims.

1. A method for evaluating an investment portfolio comprising: accessingdata for a plurality of companies in an investment portfolio; fiscallyrealigning the data; calculating at least one predetermined set ofvalues for each company using the fiscally realigned data for more thanone holdings date in a predetermined evaluation period; aggregating theat least one predetermined set of values for each holdings date tocreate aggregated values for the investment portfolio over theevaluation period; and evaluating the investment portfolio as a functionof the aggregated values.
 2. The method according to claim 1, whereinthe data includes one of historical financial data and estimatedfinancial data for the plurality of companies.
 3. The method accordingto claim 1, wherein aggregating the at least one predetermined set ofvalues for each holdings date includes weighting the values for eachholdings date with respect to the predetermined evaluation period. 4.The method according to claim 3, wherein the weighting includes dividingthe number of months between the current holdings date and the previousholdings date by the number of months in the predetermined evaluationperiod to determine a weighting factor.
 5. The method according to claim1, wherein the predetermined evaluation period includes any of a day, aweek, a month, three months, six months, a year, two years and fiveyears.
 6. The method according to claim 5, wherein the weightedaggregated values are summed and averaged to determine a performanceindicator.
 7. The method according to claim 1, wherein the at least onepredetermined set of values includes a fundamental financial measure. 8.The method according to claim 7, wherein the fundamental financialmeasure includes a generally accepted financial measure.
 9. The methodaccording to claim 8, wherein the fundamental financial measure includesone of a growth measure, a profitability measure, a capital measure, avaluation measure, a sales growth value, an earnings per share value, acommon equity per share value, a return on equity value, a profit marginvalue, an equity:assets value, an interest coverage value, a cashflow:debt service value, a price earnings value and a price:book value.10. The method of claim 1, wherein the aggregated values include one ofthe predetermined set of values having a negative value.
 11. The methodaccording to claim 1, wherein the investment portfolio includes a mutualfund, a pension fund or other investment portfolio.
 12. The methodaccording to claim 1, wherein each of the plurality of companies isidentified by a CUSIP member.
 13. A method for evaluating an investmentportfolio, comprising: accessing data for a plurality of companies in aninvestment portfolio; fiscally realigning the data; calculating at leastone predetermined set of values for each company using the fiscallyrealigned data for more than one holdings date in a predeterminedevaluation period; aggregating the at least one predetermined set ofvalues for each holdings date to create aggregated values for theinvestment portfolio over the evaluation period; and creating aperformance indicator as a function of the aggregated values;identifying one of a number of holdings and a value of holdings at afirst predetermined time for the investment portfolio; identifying oneof a number of completely new holdings and a value of the completely newholdings at a second predetermined time for the investment portfolio;identifying one of a number of completely sold holdings and a value ofthe completely sold holdings at the second predetermined time for theinvestment portfolio; summing one of (a) the number of completely newholdings and the number of completely sold holding and (b) the value ofthe completely new holdings and the value of the completely soldholdings; dividing the summed value by one of the number of holdings ofthe first predetermined time and the value of holdings at the firstpredetermined time to produce a stability ratio; and generating amultivariate analysis of the investment portfolio using at least oneperformance indicator and the stability ratio.
 14. The method of claim13, wherein the investment portfolio includes a plurality of investmentportfolios.
 15. A method for evaluation of an investment portfoliocomprising: accessing data for a plurality of companies in an investmentportfolio; fiscally realigning the data to exclude data for any companyin the investment portfolio that lacks data for an entire predeterminedevaluation period and to include data for any company in the investmentportfolio that has data for the entire predetermined evaluation period;calculating at least one predetermined set of values for each companyusing the fiscally realigned data for more than one holdings date overthe predetermined evaluation period; aggregating the at least onepredetermined set of values for each of the more than one holdings dateto create aggregated values for the investment portfolio over theevaluation period; and evaluating the investment portfolio as a functionof the aggregated values.
 16. The method according to claim 15, whereinthe predetermined evaluation period includes one of a day, a week, amonth, three months, six months, a year, two years and five years.
 17. Amethod for evaluating and comparing investment portfolios comprising:accessing data for a plurality of companies in a first investmentportfolio and a second investment portfolio; fiscally realigning thedata; calculating at least one predetermined set of values for eachcompany in each of the first and second investment portfolios using thefiscally realigned data for more than one holdings date in apredetermined evaluation period; aggregating the at least onepredetermined set of values for each of the more than one holdings tocreate aggregated values for each of the first and second investmentportfolios over the evaluation period; and ranking the first and secondinvestment portfolios as a function of the aggregated values for each ofthe first and second investment portfolios.
 18. The method according toclaim 17, wherein the performance indicator includes more than oneperformance indicator.
 19. The method according to claim 18, wherein theranking includes ranking the first and second investment portfolios as afunction of the more than one performance indicator.
 20. A method forevaluating and comparing investment portfolios, comprising: accessingdata for a plurality of companies in a plurality of investmentportfolios; fiscally realigning the data; calculating a firstpredetermined set of values and a second predetermined set of values foreach company in the investment portfolios using the fiscally realigneddata for each holdings date of the investment portfolios in apredetermined evaluation period; aggregating the first and secondpredetermined set of values to create aggregated first values andaggregated second values for the investment portfolios for theevaluation period; evaluating the investment portfolios using theaggregated first and second values.
 21. The method according to claim20, wherein the first aggregated value is a first financial measure andthe second aggregated value is a second financial measure.
 22. Themethod according to claim 21, wherein the first and second financialmeasure include one of a growth measure, a profitability measure, acapital measure, a valuation measure, a sales growth value, an earningsper share value, a common equity per share value, a return on equityvalue, a profit margin value, an equity:assets value, an interestcoverage value, a cash flow:debt service value, a price earnings valueand a price:book value.
 23. The method according to claim 20, comprisinggrouping the investment portfolios into a set of first quartiles basedon the first aggregated values and grouping the investment portfoliosinto a set of second quartiles based on the second aggregated values.24. The method according to claim 23, wherein the evaluating includescombining the set of first quartile data and the set of second quartiledata.